Monday, 19 January 2009

There appears to be no imminent end to the recession in Japan. In fact, the latest data show that it may be getting worse.

On 16 January, the Bank of Japan released its Regional Economic Report for January. The report described economic conditions in the country as "deteriorating" with all nine regions having revised their assessments of economic conditions downward compared to their assessments in October 2008.

Today's economic release from the Ministry of Economy, Trade and Industry corroborated the downbeat assessments. The report showed that industrial production fell 8.5 percent in November, worse than the preliminary estimate of an 8.1 percent decline.

Economic data released last week showed the same deteriorating trend.

The Ministry of Finance's balance of payment report on 13 January showed that exports fell 26.5 percent in November from a year earlier while imports fell 13.7 percent. That left the trade balance with a deficit of 93.4 billion yen, a complete reversal of the surplus of previous years. The current account balance remained in surplus but shrank 65.9 percent from a year earlier.

Also on 13 January, the Cabinet Office's survey of workers in economically-sensitive jobs showed a deterioration in sentiment in December. The diffusion index for current conditions from the Economy Watchers Survey fell from 21.0 in November to 15.7 in December. The diffusion index for future conditions fell from 24.7 to 17.6.

Then on 15 January, another Cabinet Office report showed that investment spending in Japan is declining further. Core private sector machinery orders fell 16.2 percent in November, the biggest fall since the current survey began in 1987.

Japan's economy may have largely avoided the financial excesses seen in the West but as an export-dependent economy in a globalised world, it is not avoiding the fallout from the financial turmoil.